Steinhoff shows resilient interims but its survival depends on legal process
STEINHOFF International produced a resilient performance in the six months to the end of March, despite operating in an environment dominated by the Covid-19 outbreak, but said on Friday that if a litigation settlement proposal process failed, the company would collapse by the end of the year.
Steinhoff owns retail businesses, such as Pepkor Holdings, Pepco Group, Mattress Firm and Greenlit Brands Group.
The troubled retailer, still reeling from the December 2017 accounting scandal which led to more than 95 percent decline in its share price, slashed its half-year loss to €359 million (R6.03bn), down from €1.52 billion, compared to last year.
In the interim report, the management assessed if the company could continue as a going concern while it rides out the fallout of the erstwhile accountancy irregularities.
The board said as at March 31, 2021, the group’s current liabilities exceeded its current assets and there was uncertainty regarding its ultimate ability to settle its long-term debts until a litigation settlement proposal was accepted by all parties.
“The matters as discussed ... therefore, cast significant doubt upon the company and group’s ability to continue as a going concern beyond December 31, 2021,” it said.
Steinhoff International said the Dutch suspension of payments (Dutch SoP) proceedings meeting regarding the deliberation and vote on the composition plan, which was originally scheduled to take place on June 30,
had now been moved to September 3.
However, the group said much as the boards embarked on the Dutch SoP, this did not impact its liquidity, which continued to pay its debts as they fell due and the boards still planned to recover the assets and settle the debt in the normal course of business.
Steinhoff increased its provision for the expected cost of the settlement from €882 million last year to €1.02 billion (R17bn) to adjust for exchange rates.
The group said on Friday that it managed to show an improvement despite the many challenges that it faced, including the restrictions on trade, as a result of Covid-19 and a weakening average rand/euro exchange rate.
“While Covid-19 constraints impacted the performance of all businesses during the reporting period, the extent of the impact varied according to their geographic exposure, business mix, and severity and duration of lockdown restrictions at a local level,” the group said.
Its revenue from continuing operations increased by 4 percent to €4.50bn, up from €4.34bn compared to last year.
Pepco Group’s revenue was up by 5 percent, Greenlit Brands surged by 33 percent, and Pepkor Holdings was up by 8 percent, in local currency.
However, the group said the weakening of the average exchange rate translated their performance into a decrease of 2 percent in the reporting currency.
Its earnings before interest, tax, depreciation and amortisation (Ebitda) from continuing operations increased by 7 percent to €686m and operating profit before capital items increased by 10 percent to €381m, while basic and diluted loss a share from continuing operations improved to a loss of 8.7 euro cents, compared to a loss of 32.3 euro cents reported a year earlier.
Its net debt of €9.84bn was up compared to last year’s €9.46bn.
Steinhoff International shares closed unchanged at R1.98 on the JSE on Friday.